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April 9, 2010 (Judy Zhang) Based on current government business policies and rules, China-based companies now have more top line revenue visibility. The toughening policies towards foreign companies actually work in favor of China-based companies.

Economic Transformation

China’s government, in general, is encouraging an economic transformation from a dependent “global factory” to a more independent and innovative economy. The aftermath of the global financial crisis, in fact, showed that China’s innovative economy can recover faster than others.

For example, after the financial crisis, many manufacturers in Jiangsu Province (one of the biggest manufacturing provinces) still showed sales declines. However, their neighbors in the Suzhou Industrial Park -- an area gathering hundreds of high-tech and innovative companies –recovered at a fast rate, up 21% compared with last year.

Indigenous Innovation

The China government recently unveiled new government procurement and patent rules that require “indigenous innovation”. These rules should help China-based companies acquire more government contracts.

It seems, therefore, that ‘indigenous innovation’ rules can create a better investment climate for China-based companies.

Equal Tax Environment

Until recently multi-nationals took advantage of various preferential tax refunds and reductions. However, at the beginning of 2008, a new income tax law mandated a universal income rate of 25% for all business. Since 1980s, multi-national companies were able to enjoy a much lower income tax rate (15% and 24%) compared to their Chinese counterparts (25%).

Maturity, prosperity, growth

These policy changes are a sign of gradual maturity and prosperity, because China doesn’t need preferential rules to encourage foreign investment in China.

Current government policy creates a better growth environment for China-based companies, and provides investors with more confidence regarding top line revenue growth.

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